Charting
the Course

What a difference a year makes. This time last year, markets were riding high, the economy was on a roll and people seemed confident as we worked our way out of the pandemic.

Almost like a light switch, those sunny days of 2021 clouded over in 2022, with rising oil prices, falling markets, inflation, higher interest rates, and the war in Ukraine.

But there is opportunity out there, and those who sit on the sidelines might miss out on gains they never knew were possible. I’m not talking about timing the market, pulling money out and hoping to catch a green wave back to the positive. Those schemes hardly ever work.

Market declines offer good opportunities to clean up portfolios by adjusting or reallocating assets so they’re ready when markets turn around. This is also a great time to revisit the team you have in place to manage your financial life. Given the current market climate, a proactive team can make all the difference.

That brings us to tax-loss harvesting, which is another form of investor housekeeping. The practice allows investors to reduce tax liability by selling equities at prices that are lower than they were when purchased. Investors can take losses and use them to reduce the size of capital gains, which are taxable. Losses can be applied in the current tax year or they can be used in subsequent years.

Now that we’ve tidied our equity holdings and tended to next year’s tax bill, this may be a good time to build diversification. Inflation is picking up steam, and interest rates are going higher. Fortunately, there is something an investor can do. Private equity, real estate and private debt are among several solid private-market investment options people can use to diversify portfolios with investments that are not tied to the public equities market. These vehicles also can turn the tide of rising interest rates in the investor’s favor while keeping pace with inflation.

It’s important to keep in mind that volatility is an inevitability. As a matter of fact, the stock market, on average, experiences a 5% decline about three times a year, a 10% decline once a year, and a 20% decline about once every six years. A good example might be the S&P 500 falling by 12% earlier this year before regaining ground in March. Amid today’s economic uncertainty, there is plenty to be optimistic about as we look ahead. Consumer demand is strong, and S&P 500 earnings are expected to set a record in 2022 and another in 2023.

But this is no time to sit and wait. Now is the time that your team of professionals should be reaching out to address any concerns and analyzing any possible action that needs to be taken. The market is ripe for a little housekeeping.

Everybody needs a coach. We all know about OU’s Brent Venables and OSU’s Mike Gundy, but you don’t have to be an elite athlete to need a coach. A lot of people have coaches to help with a variety of things.

There are golf coaches, fitness coaches, executive coaches and even life coaches. They assess our needs, help us set goals, teach us how to reach them and guide us through adversity.

Wherever there’s a goal to be achieved, there’s a coach to help us get there, even in the financial world.

You could say that coaches who make the biggest long-term impact on people’s lives are financial advisers. They’re not the kind of coaches who get glory or many pats on the back, but they may be the most committed, sticking with clients for years, even decades, to ensure they successfully reach comfortable retirements.

Make no mistake, financial advisers are not cheerleaders. Sure, they deliver the good news, but they also give the bad news, and, like any good coach, they’re not afraid to have tough conversations.

Saving is at the foundation of any financial plan, and it’s never too early to start, but most people begin seriously considering planning when they reach their 30s and 40s. By then, they’ve established careers and have accumulated savings, assets, and liabilities. From time to time, they encounter financial obstacles that can knock them off course.

To start, advisers sit down with clients and talk about their salaries and other income. They go over IRA accounts, 401(k) plans, pension plans, private investments, taxable accounts and so on. They discuss mortgages and other debt, then look at future Social Security income. It’s a little like the first day at the gym with a personal trainer.

Once the evaluation is complete, the journey begins with the financial adviser serving as investment manager and financial planner. Remember, it’s a marathon, not a sprint. Reviews might be once a year or twice a year with some emails or phone calls in between. Life changes are inevitable, and the financial planner is there to help with adjustments to ensure clients stay on track.

Fees a client pays can vary for financial planning. The service comes standard with accounts at some wealth management firms or is considered an a la carte option at others. Even large custodial firms that manage 401(k) programs offer financial planning through interactive websites.

The financial journeys we take are too important to travel alone. Just like the Sooners and Cowboys, we need people to help us with our game plans and to advise us when it’s fourth and long. In life, we make a lot of decisions on our own, but when our financial futures are at stake, it helps to have a coach.

Kyle Ray is a licensed financial adviser, serving individuals and families.

Remember when we were kids, spending the day at Six Flags or some other amusement park, binging on roller coaster rides and any number of other thrilling adventures?

At the end of the day, we were disappointed that the fun was over and a little bummed that we were walking back into a calmer, more mundane reality. We were kids, so our post-park depression may not have been mollified by what was ahead, like summer camp, our family vacation, the scout trip, or some other big adventure.

That may be how a lot of investors are feeling today, as we watch the stock market move into what is shaping up to be a tumultuous 2022. Last year’s market was one of those wild rides that left everyone laughing and high fiving all the way to the turnstiles. The S&P 500 gained 29% on the year and posted 70 record closes while 88% of stocks in the index posted positive gains. Indeed, there was plenty to smile about.

In comparison, 2022 may seem more like that long walk back to the parking lot with our parents. We can feel the exuberance wearing off as we consider an economy beset by inflation and interest rates poised to go up. The S&P started January in a pretty good mood, hitting another all-time high before slumping into correction territory later in the month.

But let’s remember that parking lots are not the end of the world and going home is much better than spending the rest of your life in an amusement park. How long can the market keep powering higher at double digit rates, anyway? After all, the S&P was up more than 18% in 2020, despite the pandemic.

As we’ve seen in January, the market is not going to respond well when the Fed starts raising interest rates in March, but even with the expected increases, rates will still be low relative to historical norms.

Speaking of history, S&P 500 returns have been quite good in years following market gains of 25% or more. On average, second-year gains have been 14% with only three instances of negative returns. Corporate earnings are also expected to grow in 2022, with analysts predicting a 9% jump in profits.

While trying to predict returns over a one-year period is little better than a dart-throwing exercise, it would be safe to expect 2022 returns to be lower than they were in 2020 and 2021, so wise investors will control the things they can control. They will maintain portfolio diversification to reduce risk, rebalance portfolios in a disciplined way, contain costs to increase net returns, and harvest tax losses when appropriate.

This year may seem like the ride home from an amusement park, but remember, the next big adventure could be right around the corner.   

Just about every budding entrepreneur kicks off their dream with a difficult conversation. The talk may be over the kitchen table, in a car, rolling down the highway or on the back porch.

Spouse to spouse or as a family, it might start off with, “I have this idea…,” followed by, “The hours might be long,” and, “The income could be a little short for a while.” The back-and-forth may continue for a few days or a few weeks until a decision is made, and a plan is set into motion.

Starting a private business from scratch requires hard work and perseverance, and the risks are not for everyone. So, as we approach our fourth anniversary at Full Sail Capital, we are looking back with gratitude at our blessings and good fortune after growing from a zero-dollar financial management startup in 2018 to an established concern today with more than $1.6 billion under management.

No matter what business you’re in, there is plenty of competition out there, so it does no good to enter the fray with the same ideas as everyone else. Full Sail co-founders Scott Cravens, Zac Reynolds and I started the firm with a different vision for how to grow. We built Full Sail on a foundation of integrity, teamwork, and a passion for serving people. While those character ideals may seem pretty typical, our focus on skill set diversity was not.

We envisioned a broader approach as fiduciaries, helping clients manage wealth, investments, and their financial futures. Aside from the seasoned financial advisers that are at the core of our business, Full Sail’s staff is composed of attorneys as well as experts in real estate and trusts. We even have a certified public accountant in the firm. But that doesn’t mean we’re our clients’ lawyers or real estate brokers, and we don’t do their taxes.

Our experts serve as intermediaries, meeting with our clients’ CPAs, their tax attorneys and real estate professionals. We ensure solid lines of communication, and as a result, our clients can integrate wealth and set up estate plans with confidence, and many save thousands at the end of each tax season.

There’s an adage that says, “If you want to go fast, go alone, but if you want to go far, go together.”

In our business, financial rewards often follow individual effort, but we don’t work alone at Full Sail. We compare notes, share ideas, collaborate, and take full advantage of every skill set we have to help our clients. In the end, people are noticing.

So, as we wrap up our fourth year in business, we thank our families for those difficult conversations and for sticking with us through the lean, uncertain times, and we give credit to our staff, which bought into our vision of serving people through teamwork and integrity.

The past four years have been a roller-coaster ride full of surprises and adversity, but looking back, the challenges may have been an affirmation of the vision we had at the very beginning.

“If you want to go far, go together.”

OKLAHOMA CITY – Full Sail Capital has moved into its new offices at 10th Street and N. Broadway Avenue.

“The energy in Midtown is a good fit for our firm as we continue to grow amid the district’s restaurants, shopping and offices,” Full Sail Capital founder and Chief Executive Officer David Stanley said. “Our new location was selected with our clients in mind as we continue to build on our wealth management and financial planning services.”

Relocated from offices near Kelley Avenue and Britton Road in north Oklahoma City, the company celebrated its move with a ribbon-cutting, culminating a relocation process that began more than a year ago.

Full Sail Capital was founded in February 2018 with five employees and zero dollars under management. Since then, the firm’s staff has doubled in size and assets under management have grown to $1.6 billion, placing Full Sail Capital among the state’s largest independent financial advisory firms.

Full Sail’s new location has 8,000 square feet, which is twice the size of the firm’s former location, allowing the company to further expand.

From Midtown, Full Sail Capital’s staff and clients will be walking distance from many of Oklahoma City’s favorite restaurants and social gathering places while downtown and Bricktown are a mere trolley ride away, allowing easy access to sports and performing arts venues as well as museums and other entertainment.

“The ongoing renaissance in Oklahoma City is exciting for everyone and underscores how far our community has come as we watch its diversity and economic opportunities

In just a few weeks, Full Sail Capital will be moving its offices from north Oklahoma City to the Midtown District, an area full of optimism, growth, and excitement for the future.

After nearly four years of helping clients manage assets, investments, and wealth in Oklahoma, our firm shares that enthusiasm. Oklahoma City is growing, evolving, and prospering on a foundation of blue-collar values attracting thousands from across the country to pull up roots and move here.

We are strong believers in the Oklahoma standard because most of Full Sail Capital’s management and staff were raised here, educated here, and started their careers here. So, we are committed to our state, and we’re excited about planting our flag even deeper into Oklahoma soil.

And we are not alone. The talent pool in Oklahoma is getting broader and deeper in almost every field as we have watched our state transition from the “brain drain” of the ’80s and ’90s to rapid population growth over the last decade.

Did you know Oklahoma City has grown by more than 100,000 new residents since 2010? That represents nearly half of the state’s overall population growth during that period. According to Census 2020, OKC is now the sixth fastest-growing city among the nation’s 25 most populated cities. Incredible.

And rest assured, the financial industry has taken note. The quality of our financial professionals is as good as any in the country, so rather than hire strangers in New York, Chicago, Dallas, or some other financial center, Oklahomans are finding high-caliber tax attorneys, certified public accountants, registered investment advisors, real estate brokers, investment banks, venture capital firms and other financial professionals in OKC.

With a little homework and some conversations with trusted friends and colleagues, people are finding the local fiduciaries, seasoned attorneys, and tax pros they need to manage and protect their assets. Hiring locally brings numerous advantages. The most notable of these is a real relationship that grows through face-to-face interactions, which beats phone calls or Zoom meetings every time. Trust is best maintained when you can look someone in the eyes, and incentives remain aligned when your adviser may see you at church, the grocery store, or a Thunder game.

Physical presence is assurance, and it demonstrates commitment, not only to our clients, but also to our community. It’s an exciting time to be in OKC, and we can’t wait to be part of that excitement in our new offices at 10th and Broadway in Midtown. The renaissance is continuing in Oklahoma City, and we think people and relationships are at the heart of it all.

There has been plenty to worry about over the past year-and-a-half. With the virus, the lockdowns, the economy, and all the illness, it is not surprising that many have placed 401(k) plans and retirement savings on the sidelines until things calm down.

While the pandemic is still in the news, the economy is moving forward again as businesses regain their traction, so this fall may be a good time to either dust off those existing retirement plans or to consider establishing one. After all, employers are going to need them if they want to keep employees and recruit new ones in today’s tight labor market.

If there is one thing that I have missed the most during the pandemic, it has been getting out and talking with employees and employers about their plans. I love to educate employees about why retirement savings is so vital, and I like to encourage businesses to establish plans and to make 401(k) education a priority.

For employers, retirement plans are living, breathing entities that require continuous maintenance and management. While retirement plans hold vast savings opportunity for employees, there are many options and important decisions to be made, even for those with existing accounts.

Many successful retirement plans are managed through a team of partners composed of company representatives along with an independent fiduciary adviser, and an investment platform provider, such as Fidelity or Empower. Some teams also have an independent third-party administrator.

And once the team is up and running, its members must be in continuous communication to ensure that no aspect of the plan gets overlooked or is mismanaged, creating a system of checks and balances that protect employees and employers.

If it’s been a few years since you had your plan design reviewed, now may be a good time to go through the process. Businesses should look at features such as auto-enroll and Roth contributions. They might also consider a safe-harbor match, which is a form of mandatory employer contribution to employee retirement accounts.

Next, employers should consider forming a retirement plan committee, consisting of a few C-level executives, a manager or two, and a general employee. These committees meet to consider employee concerns and feedback, review their investment policy, and manage other internal functions.

Employees who have never had a 401(k) plan should remember to start small and build from there, and they should make sure they understand the company match, if it is offered. When companies match contributions, it can be a tremendous benefit, so employees should contribute enough to earn the full match.

For those who already have a 401(k) plan, there may still be work to do. They should consider signing up for the auto-increase feature, which automatically increases an employee’s annual contribution by a specific percentage point. For example, an employee could have their contribution increased by 1% on Jan. 1 of every year.

For employees who are novice investors or are simply too busy to keep up with the day-to-day dynamics of the financial markets, there is an array of target-date funds available to help keep retirement investors on track. These funds consider the investor’s age and years until retirement, and they adjust their asset mix over time, moving into less risky asset classes as retirement nears.

So, as the storm clouds of 2020 clear, it may be time to refocus on the future of our businesses, the future of our employees and to remember that retirement savings programs deliver solid returns for both.

Inflation is not something we have had to talk about much over the past few decades. In fact, many of us weren’t even born the last time the Consumer Price Index, or CPI, peaked to levels that shook the economy.

Those who were around in the 1970s may remember watching staples like a loaf of bread double in price along with the average price of a new car. Gasoline led the inflationary charge, tripling in price from 36 cents to $1.19 per gallon.

Fortunately, the Federal Reserve Bank has used monetary measures to help keep inflationary pressure under control since the CPI hit 13.5% in 1980. But those days left a lasting impression.

Inflationary alarm bells began ringing louder this summer when the CPI rose to 5.4% in June, the highest it has been since the global financial crisis battered the economy in 2008. So, there is no wonder all eyes are on Fed Chairman Jerome Powell.

“Transitory” is the word Powell is using to describe the current run-up in consumer prices, but market watchers worry inflation could be more stubborn, prompting interest rate hikes, slowing the economy, and dragging down stock prices.

Inflationary pressures abound. A worker shortage and an abundance of cash in consumer bank accounts means there are a lot of dollars chasing a constrained inventory of products and service, leading to higher prices. The price of lumber is one well-known example, but prices are going up on everything from fast food to cars and trucks.

For an explanation, look no further than the size and scope of government stimulus. Between the Trump and Biden administrations, more than $5.3 trillion was allocated to shore up the economy during the pandemic. The fiscal response, combined with the Fed’s multitrillion-dollar monetary response in 2020, has led to the largest ever annual increase in money supply.

There is simply no historical guide to show us what inflation may do in response to such unprecedented government action. Chairman Powell could be right, and inflation may well fade as the economy reaches post-pandemic equilibrium. But investors are looking for ways to protect their money from a potential return to the 1970s.

Obviously, cash is out, and investors should also be cautious about fixed-rate bonds, which are particularly at risk in inflationary periods. For example, the 30-year U.S. Treasury bond currently yields about 2%. If inflation runs at 3% over the next 30 years, investors will lose about 1% a year in purchasing power.

For bond investors, there are alternatives. Inflation can lead to higher interest rates, so bonds with shorter maturities are better suited to take advantage of higher rates when maturities are reinvested. Perhaps the most straightforward way to protect a bond portfolio against inflation is to use Treasury Inflation-Protected Securities, which are bonds that receive an increase in principal value that is equal to the rate of inflation.

Stocks have a mixed record when it comes to inflation. On the downside, inflation usually forces interest rates higher, which can push earnings lower, leading to lower stock prices. On the other hand, companies can adjust prices in response to higher costs or higher demand, which is a built-in protection against inflation.

Remember that mild inflation is not necessarily a bad thing. The Fed would like to see inflation settle at 2%. The economy and markets seem to be comfortable with that, and historically, the market has delivered its highest real returns when the rate is between 2% and 3%.

The worst pandemic in a century has left plenty of mayhem to untangle before life can get back to normal. Small businesses are regaining footing amid a worker shortage, prices are rising and supplies of everything from new cars to washing machines are tight.

While those are among issues capturing headlines, there are other wounds in our community that need attention.

Imagine what it must have been like to operate a nonprofit last year. Many saw demand for services spike while income from contributions dropped and volunteer enthusiasm waned.

Like small businesses, nonprofits this year are struggling to get back, and they are competing for volunteers in one of the worst worker shortages in memory.

So, as we move into the second half of 2021, remember the role nonprofits play in strengthening communities. Nonprofits are on the front lines, feeding the hungry, providing supplies to new mothers in need, offering health care and rescuing abandoned animals. They support the arts, promote literacy, provide social services, and more.

Financial contributions and volunteer time go hand in hand, and both are necessary for an organization’s success.

Donations help organizations pay rent, utilities and administrative costs. All nonprofits depend on support from contributors, foundations, and grants, but sometimes, the most important gift is time.

Volunteers are an essential resource. They help with day-to-day operations, serve as board members, and provide professional services such as accounting, marketing, legal assistance and fundraising.

Donating time and being involved strengthens ties to the community because volunteers see a side of life they might not see otherwise. And volunteerism is not just for adults. Children can learn the importance of giving, and their experiences can show how much they have been blessed in their lives.

There are many ways to donate. There are conventional ways through credit cards, checks and cash, but there are methods that offer greater tax benefits. A Donor-Advised Fund functions a little like a foundation. The owner can make deposits into the fund, where it can grow through investments. At any time, money from the fund can be donated to a nonprofit organization. The benefit is that tax laws allow an immediate tax deduction when money is deposited.

Whether providing support through time or money, it is important to find the right fit. There are many organizations that serve a variety of causes, so volunteers and donors should follow their passions as they search for organizations to help.

The Oklahoma Center for Nonprofits is a first step in locating nonprofits that share similar interests. Follow the link to the center’s member directory to find organizations according to location, population served, and mission focus: Oklahoma Center For Nonprofits (okcnp.org).

In the financial industry, we sometimes see investors change their priorities, shifting the purpose of their investing to fulfill higher purposes as they seek more fulfillment and happiness in their lives.

For many, the main goal behind investing is retirement, the simple act of accumulating the financial resources necessary to support the next stage in life. People set aside money each year, taking comfort in knowing they will have financial security in the future while they spend what is left on other things that bring more immediate pleasure.

There is no doubt that saving for a prosperous retirement is a sure route to contentment. But is that all it takes to ensure happiness in life?

Abraham Maslow would probably say it is not. Many of us might remember the late American psychologist and philosopher from our studies in school. He was known for the Hierarchy of Needs theory he published in 1943.

According to Maslow, people must fulfill the basic needs of human survival – food, shelter and clothing. After that, his theory suggests there are other needs that must be attained to achieve happiness. Matters such as social status, achievement, creativity, passion and higher purpose become more important to those fortunate enough to have a roof over their heads and plenty to eat.

Recent literature expands Maslow’s thinking to include three different types of happiness: pleasure, passion and higher purpose.

Pleasure may be the most obvious form of happiness. We can achieve pleasure through material objects, enjoyable activities, or other transient inducement, but pleasure can quickly fade after the new car smell goes away, the vacation ends, or the championship football season is over.

Many of us find happiness through the passion we have for our jobs, our hobbies or other type of endeavors that promote energy and inspiration. But, as everyone knows, seasons of life change along with the shifting winds of emotion. One day, we might discover our passion is gone, leaving us searching for a new source of happiness.

While pleasure and passion can be transitory, working for a higher purpose can be an extended source of happiness that comes from being part of something bigger than ourselves.

Investors have always found pleasure in watching their investment portfolios grow with our economy and the markets. Some of them have compounded their fulfillment by investing for a higher purpose and formalizing plans to leave a legacy to family members or specific charitable causes.

But investing to help others takes planning and communication, and that does not always happen effectively.

For example, 88% of wealthy investors have an estate plan in place, but 40% of them say their plans are not comprehensive enough. Almost 50% say they don’t fully understand their own plan, and more than half have not properly documented personal property and assets. Meanwhile, they have no documented distribution instructions, leaving room for family conflict. Only one-third have named a power of attorney, and just 3% of wealthy business owners have a business succession plan.

Even the well-intentioned have loose ends to address, but there is plenty of help available to resolve them. People can work with attorneys, tax experts and financial advisers who specialize in estate planning.

By shoring up plans and communicating with family and others, investors can provide clearer guidance for investment decisions, identify future goals, prevent conflicts and most importantly, create lasting happiness.